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April 19, 2018 | money-management

Start Off on the Right Foot Financially After College

Congratulations! Your hard work paid off and you’ve landed your first job after college. It’s OK to enjoy this new inflow of income, but it's also important to think about creating a savings plan that will set you up for continued success in the future. Starting off on the right foot financially will provide you with peace of mind for years to come. Don't know where to start? Don’t worry, saving money can be easy and even fun.

Making Your First Budget

Budgets don’t have to be complicated or scary. There are many options to help you get started and stay on track. There are free online tools available, or you can simply use a spreadsheet or even pen and paper.

Start by calculating your total monthly income. You will want to use your take-home pay, after taxes and other deductions. Next make a list of your necessary expenses, or the bills you must pay each month. This would include your rent or mortgage, car payment, car insurance, student loan payments, gasoline, groceries, utilities, phone bill, cable/TV bill, etc. If a bill is paid quarterly or annually, determine the cost per month. Some of these expenses, like your rent or car payment, will be the same amount every month, or fixed. Others, like groceries or gasoline, are variable and will need to be calculated. Estimate how much you spend each month on these variable bills.

The next step is to determine your discretionary spending. This includes your spending for eating out, entertainment, savings, clothes, gym memberships, gifts, donations, vacations, etc. Create categories that make the most sense to you. Go back at least a month to see what you have been spending in each category of your budget.

Now total your monthly expenses and subtract this amount from your monthly income. If you spend more than you earn, you will need to make cuts in your budget right away! If you earn more than you spend, congratulations! If you like, you can now tweak your budget to ensure you are meeting your financial goals.

Set Savings Goals

Setting goals is a great way to provide encouragement for you to stick with your savings plan. Find fun rewards for yourself when you hit savings milestones. Or create savings goals when you want to make a big purchase or go on vacation.

Pay Down Your Debt

If you’re like most students, you’ve acquired some debt during college. The good news is, it is possible to save while also paying down your debt. Take a close look at the interest rates you’re paying on things like student loans, and be sure you understand the payoff schedule. If your budget allows, think about making extra payments. Paying a loan off quicker than the schedule can lower the total amount you end up spending on interest.

How Much Should You Put In a 401(k)?

401(k)s present an opportunity to quickly increase your savings. Be sure to take full advantage if you have a 401(k) with an employer match, as this is free money that goes directly to your retirement savings. You don’t want to leave any of it on the table.

It’s never too early to start saving. Make a budget, set a monthly savings goal, and do your best to stick to it. Life changes will happen along the way, and sometimes your finances will get off track. But having that plan and getting back on track as soon as possible will ensure that the smart financial habits that you learned early will serve you well throughout the years.